Renowned technology research firm Gartner Inc. (IT) recently revealed its IT spending forecast for 2010. The firm is bullish on the revival in sentiment across the globe, and expects that spending on technology products and services will reach $3.4 trillion, registering a growth rate of 5.3% compared to the year-ago quarter.
Gartner has projected the highest growth rate in IT spending among the research firms that have come out with projections recently. Gartner’s method includes telecom spending projections, which the firm expects to be around $2.0 trillion in 2010. Forrester Research has also made a projection: tech spending will grow at the rate of 7.7% to reach at $1.6 trillion in 2010.
We believe this will have a significant positive impact on revenue of the frontline tech companies. The companies have already started experiencing the positive impact of such revival, with the largest computer manufacturer Hewlett-Packard Company (HPQ) delivering strong first quarter 2010 numbers.
H-P reported first quarter EPS of $1.10, exceeding the Zacks Consensus Estimate by 4 cents. Revenue increased substantially, growing 8.0% for the prior year, to reach a level of $31.2 billion. The company witnessed revenue growth and increase in business activity across all its geographic and business segments, with highest growth rate in the Asia-Pacific region.
Based on a revival in macroeconomic fundamentals, H-P has also increased its fiscal year revenue guidance, expecting revenue of approximately $121.5 billion to $122.5 billion in 2010, up from its previous estimate of $118.0 billion to $119.0 billion.
Another tech major Dell Inc. (DELL) also witnessed the positive impact of this improved tech spending, which is reflected in its last quarterly earnings announcement. Revenue for the quarter improved 11.0% year over year to reach $14.9 billion, while improving 16.0% sequentially.
The company’s fourth quarter revenue growth can be attributed to revenue improvement in all business segments, especially due to growth in the commercial business, fueled by growth in Enterprise Technology and also due to an increase in product shipments, as the company reported its first consolidated results after the Perot acquisition.
Gartner is of the opinion that spending by large businesses will resume growth in 2010, although they are unlikely to reach 2008 levels in the near future.
Apart from the tech giants, other tech companies are also expected to benefit from the upsurge in IT spending. These include enterprise cloud computing company Salesforce.com (CRM), as well as other Internet security companies like McAfee Inc (MFE) and Symantec Corporation (SYMC).
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